Sage 'encouraged,' on target for 12% growth

Under control in 'challenging' market

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Accountancy software vendor Sage Group Plc claims to be on course to meet market expectations when it posts its earnings for the year to September 30. Analysts expect the Newcastle, UK-based company to increase pre-tax profit by 12% to £136.2m ($211.1m), maintaining the growth rate it recorded last year.

Although Sage was one of the best performing UK IT companies in the 1990s, its share price has halved in the past year in the face of growing doubts about its future. Not only was it thought to be vulnerable to the economic slowdown but the arrival of Microsoft Corp on its patch, through its December 2000 acquisition of Great Plains Software, was believed to pose a huge obstacle to future growth.

Sage has always boasted of close relations with Microsoft, but showed its concern when it made an unsuccessful appeal in May to the monopolies commission in Denmark to protest over what it saw as the anti-competitive nature of Microsoft Corp's acquisition of Danish mid-market ERP vendor Navision A/S.

Sage said it is encouraged by its financial performance in challenging market conditions. It also pointed to the progress made by CRM vendor Interact Commerce Corp, which it bought in a $263m cash deal in March 2001. In July, Sage folded Interact into Best Software, another acquired company to form Best Software's CRM division.

While Sage has a policy of entering markets like CRM for products that it can sell to its customer base, this is another market targeted by Microsoft, which now casts a shadow over Sage's future.